IMF Presses China to Tackle Financial Risks

Mark Magnier, The Wall Street Journal

China’s currency is largely fairly valued but Beijing needs to speed up financial reform to head off the risk of systemic shock, a senior International Monetary Fund official warned.

David Lipton, the IMF’s first deputy managing director, said China’s corporate debt is high and rising fast, and that tackling this and other problems without delay is essential given uneven progress in restructuring and weaker bank balance sheets that make it more difficult to absorb financial shocks.

The IMF estimates that China’s corporate debt is equivalent to 145% of gross domestic product, which it describes as “high by any measure.”

“China stands at a crucial juncture,” Mr. Lipton said at a Tuesday news conference in Beijing at the end of a roughly annual review of the nation’s financial stability. China’s medium-term outlook is increasingly uncertain, he said, “due to rapidly rising credit, structural excess capacity, and the increasingly large, opaque, and interconnected financial sector.” Read more